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Personal Finance

by: Clifford Dickinson

Personal Finance HDFS 238

Clifford Dickinson
GPA 3.53

Pam Boyce

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About this Document

Pam Boyce
Class Notes
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This 4 page Class Notes was uploaded by Clifford Dickinson on Saturday September 19, 2015. The Class Notes belongs to HDFS 238 at Michigan State University taught by Pam Boyce in Fall. Since its upload, it has received 31 views. For similar materials see /class/207358/hdfs-238-michigan-state-university in Human Dev And Family Sciences at Michigan State University.

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Date Created: 09/19/15
HDFS 238 Study Guide for Exam 1 Income and Expense Statements over a specific past time period Income Fixed and Variable Expenses Net Gain Loss Fair market value Examples of fixed and variable expenses Disposable and discretionary income Balance Sheet or Net Worth Statement Assets Liabilities Net Worth Example of liquid assets tangible assets and investment assets Example of a shortterm and longterm liability we Importance of a goal for success Consumer Expenditure Survey Consumer Price Index Market basket of goods and services from CES Measure changes in prices and therefore inflation M Difference in secured and unsecured credit Match spending styles to credit cards Credit ratios How much can you afford Credit Bureaus and credit scoring How can you keep a good score Know the credit laws that protect consumers Appropriate uses of credit Study Guide HFDS 238 Dow Jones Close May 3 1280751 May 4 1272358 Financial literacy your knowledge of facts concepts principles and technological tools that are fundamental to being smart about money Personal Finance the study of personal and family resources considered important in achieving financial success it involves how people spend save protect and invest their financial resources Financial Responsibility your are accountable for your future financial wellbeing and that you strive to make good decisions in personal finance Financial Success achievement of financial aspirations that are desired planned or attempted Business Ncle a process by which the economy grows and contracts over time Financial Planning the process of developing and implementing a coordinated series of financial plans Financial Goals the specific long intermediate and short term objectives to be attained through financial planning and management efforts Financial Strategies preestablished plans of action to be implemented in specific situations Balance Sheet net worth statement describes an individual s or family s financial condition on a specified date by showing assets liabilities and net worth Cashflow Statement lists and summarizes income and expense transactions that have taken place over a specific period of time such as a month or year Fair Market Value what a willing buyer would pay a willing seller Liquid Assets easily converted to cash I Cash I Checkingsavingsaccount I Savings bonds CODs money market accounts Tangible Assets personal property used to maintain your everyday lifestyle I Automobiles boats I House condo I Appliances I Jewelry tools Investment Assets include tangible and intangible items acquired for monetary benefits I Stocks bonds gold IRAs I Life insurance I Real property Shortterm Iiabilities paid off within one year I Personal loans owed to others I Credit charges I Utility bills insurance premiums LongTerm debt comes due in more than one year I Automobile loans I Mortgages I Education loans Fixed Expense paid in the same amount during each time period I Retirementcontributions I Housing I Automobile Variable Expense I Meals I Utilities I Gas Disposable lncome amount of income remaining after taxes and withholding Discretionary lncome money left over after necessities such as housing and food are paid CPI market basket of goods and services from CES measure changes in prices and therefore inflation Credit I Secured a line of credit that is backed with collateral such as cash or other assets I Unsecured No collateral promise to repay Credit Ratio 15 18 of disposable income Credit Bureaus Equifax Transunion Experian FICO score 35 Payment history 30 amounts owed credit history 15 Card Act of 2009 no interest rate increases no over limit fees no one under 21 wo parent orjob Protection I Debit Cards Electronic Funds Transfer Act I Equal Credit Opportunity Act prohibits discrimination I Fair Credit Reporting Act ensure confidentiality accuracy consumers right to know I Fair Credit Billing Act to correct mistake and errors I Fair Debt Collections Act prevent unfair debt collector practices I Fair and Accurate Credit Transactions Act FTC FRAUD Loans I Subsidized Based on need gov t pays interest I Unsubsidized NOT based on need borrower responsible for interest Hope tax credit 1800 per student Bankruptcy I Chapter 7 provides for the liquidation of assets with proceeds applied to paying off excusable debts to the degree possible I Chapter 13 designed for individuals with regular incomes who might be able to pay off some or all of their debts given certain court protections Savings I Checking accts I Money Markets earn interest limit withdrawals min balance required I CD for a fixed term 6 mo 4 or 5 years risk and reward penalty for early withdrawal Laddering of CD or Bonds liquidity earn highest amount of interest FDIC insurance of money for up to 250000 APY return on total interest received on 100 deposit for 365 day period given institutions simple annual interest rate and compounding frequency Bonds I Par multiple of 1000 that is printed on bond when issued I Coupon Rate interest rate printed on the certificate when the bond is issued I Call allows issuer to repurchase the bond at par value I Discount diff between purchase price of Tbill and what Treasury pays you at interest Government Bonds I TBill short term gov t securities w maturities ranging from a few days to 52 weeks I Treasury note or bond fixedprincipal fixed interest rate gov t security issued for an intermediate or long term 2 3 4 10 yearspay interest every 6 months I US gov t savings bonds nonmarketable interest bearing bonds issue by Treasury Municipal Government Bonds long term debts issued by local governments and their agencies Corporate Bonds interest bearing certificates of longterm debt issued by a corporation Bond Ratings rated by Moody s and Standard amp Poor s AAA being high qualitysmall risk and down from there alphabetically Junk Bond a bond rated BB or lower because of its high default risk Zero Coupon Bonds municipal corporate and Treasury bonds that are issued at a sharp discount from face value and pay no annual interest but are redeemed at full face vale upon maturity Yield to Price Coupon rate SSPrice of bond Stocks ownership equity I Common most basic form of ownership of a corporation I Preferred fixed income ownership security in a corp Receive fixed dividend per share before any common stockholders no voting Investments Exchanges I NYSE I AMEX I NASDAQ lndex monitor what is happening trends on the exchanges I DJIA 30 actively traded blue chip stocks most widely reported I SampP 500 stocks of large publicly traded firms I NASDAQ composite all US stocks 3000 traded OTC first electronic based I Russell 2000 3000 largest companies based on market capitalization I Wilshire 5000 practically all 6000 US hq ed stocks that trade on major exchanges I NIKKE Stock Rating Value line Morningstar SampP Prospectus highly legalistic info presented by a firm to the SEC and to the public with any new issue of stock describes financial status legal matters risks Income Stock stock that may not grow too quickly but year after year it pays a cash dividend higher than that offered by most companies Betaltl Growth Stock describes the stock of a company that offers the promise of much higher profits tomorrow and has a consistent record of rapid growth in earnings in all economic conditions High PE Betagtl5 BIuechip public corp been around for a long time has a well regarded rep dominates industry solid safe investment Value Stock trades at a low price relative to company fundamentals and considered undervalued low PE Income Company I Dividendsconservative I Short term goal Growth Company I Capital appreciation aggressive I Long term goal Beta 0 less sensitive I l moves w market 5ampP I 2 more sensitive Stock Split no change in 3 to shareholder no change in 3 to company II and price of shares change Mutual Fund shared investment offers low cost access to a high quality money manager profess money mgt diversification flexible risk level Load fees I A front end best for long term I 3 back end highest cost not recommended I C level load best for short term EquityIncome Funds high dividends Growth Funds low dividends returns from capital gains Balanced allocated assets 60 stocks 40 bonds Risk Order Bonds Income Index Growth International Index funds no load no fees NAV value II of shares ETF quothybridquot of stocks and mutual funds tax efficient no min purchase


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